PPI headache intensifies for RBS after late surge in claims

● Fresh provision of up to £900m revealed by lender ● Analysts warn that other banks may face top-ups

Royal Bank of Scotland will take a fresh hit of up to £900 million for payment protection insurance( PP I) after a surge in last-minute claims, adding to a bill that has already exceeded £5 billion.

The Edinburgh bank said the number of claims during August was “significantly higher than expected”, with a spike in the final days before the 29 August deadline.

RBS now expects to take a charge of between £600m and £900m for PPI in its third-quar ter results. This would come on top of the £5.3bn in provisions already set aside by the part-nationalised lender.

There has been an industrywide rush in PPI mis-selling claims this year before the late August deadline, with a flurry in the final few days.

Rival lender Santander was forced to extend its deadline for claims to be submitted after complaints that its website was not working, which it said was due to the high numbers of customers contacting it about PPI.

RBS’S fresh PPI charge looks set to dent its third-quarter figures after a robust first half, which saw it deliver a £1.7bn special dividend payout for shareholders.

That followed the bank’ s strongest half-year bottomline profits in more than a decade, with attributable profits jumping 130 per cent to £2bn. But RBS made no further PPI provisions for the half year at the time.

An estimated 64 million PPI policies were sold in the UK, many in the 1990s and early 2000s. They were intended to cover missed debt repayments and were frequently marketed to consumers using aggressive tactics.

The lender most affected by PPI has been Bank of Scotland owner Lloyds Banking Group.

Shore Capital analyst Gary Greenwood noted yesterday: “The [RBS] news will no doubt raise concerns that additional top-ups maybe required by other lenders, with Lloyds historically the most exposed, having already set aside £20.075bn of provisions as at 30 June, 2019.”

Last month RBS was rapped over the knuckles by the competition watchdog over its handling of PPI comp ensa - tion.

The lender failed to provide annual PPI reminders to almost 11,000 customers for up to six years, according to the Competition and Markets Authority (CMA).

It means that those affected were unable to fully assess whether they wanted to continue paying for PP I, and were stopped from shopping around effectively.

Many customers may not have even been aware that they still had PPI, the watchdog added.

The CMA ordered RBS and fellow lender Santa nd er to appoint independent auditors to check how they remind customers who have PPI. RBS notified the CMA of the breach by 20 April last year.

sreid@scotsman.com